Homeowners With No Mortgage Offer Clues to Recovery

As federal regulators and banks argue over whether new lending standards will make mortgage credit too tight or too expensive, one important fact about the housing market goes largely overlooked: More than 20 million American homeowners own their homes outright. No mortgage.

This represents just about one third of all homeowners nationwide, according to a new report from Zillow, a real estate information, sales and mortgage website.

Demographics, home prices and geographical location all seem to play into "free-and-clear" home ownership, according to Zillow's survey.

Out of the nation's top 30 housing markets, Pittsburgh, Tampa, New York, Cleveland and Miami had the highest percentage of free-and-clear homeowners. A high number of all-cash, foreign buyers probably plays into New York and Miami. The other cities have relatively low home values, compared to the rest of the nation, making it easier for homeowners to either buy their homes outright or pay off their mortgages more quickly.

Washington, D.C., Atlanta, Las Vegas, Denver and Charlotte had the lowest percentage of homeowners with no mortgage. Las Vegas, hard hit by the housing crash, saw many of its homes go to foreclosure and those homes then go to all-cash investors. (Read More: Banks Pay Big for Robo-Signing…Again.)

Demographic factors, like age and credit rating, also influence who does and who does not have a mortgage. According to Zillow, 65- to 74-year-olds are most likely to be free-and-clear, followed by 74- to 84-year-olds.

Obviously the longer someone owns a home, the more likely they are to have paid off a mortgage. When looking at free-and-clear ownership rates as a percentage of homeowners in various age groups, however, Zillow found 34.5 percent of 20- to 24-year-old homeowners are free of mortgages. That may be a factor of the recent housing crash and tighter lending standards. (Read More: Mortgage Recovery Still Rocky.)

CFPB Tightens Mortgage Lending Rules

CNBC's Diana Olick reports a U.S. consumer watchdog group has made mortgage policy changes on banks in an effort to protect borrowers from the ills of the past decade.

So what can these factors tell us about the current housing recovery?

One of the biggest drags on the housing market is that nearly one third of all borrowers owe more on their mortgages than their homes are currently worth. These so-called "underwater" borrowers are stuck in place, unless they want to pay in to their mortgages to get out of their homes.